The falling price of oil, Russia’s main export, and Western sanctions have caused the fall of the ruble, which has sunk over 50 percent since last summer. According to official figures, the overall rate of inflation in Russia was 11.4% in 2014. By the end of this January it reached 13%.
On December 15, 2014, the Central Bank of Russia increased the already high interest rate from 10.5% to 17%. It was expected to lead to the stabilization of inflation and the fall of the ruble (which it did not stop); nevertheless, it created a lot of new problems. By the fourth quarter of 2014, Russian banks had reduced their lending to consumers by 20.44% compared to the same period of 2013. For Russians, loans have become simply unfeasible.
Last week Central Bank dropped the high interest rate to 15%. Will it solve the problems?
On February 1 Elvira Nabiullina, Russia’s Central Bank chief, said on the news program of Russian Channel One TV:
“Our current forecasts indicate that inflation will reach its peak somewhere in the second quarter”.
One of the most popular Russian Newspapers “Moskovskij komsomolets” had placed this picture on the front page of the February 1 issue. The text is: “We stand firmly on the ground”.
Rising inflation steadily eats away at Russians’ salaries.
During last two months, most of prices have grown 1.5 to 2.5 times.
The average monthly income of a resident of Moscow is 56,000 rubles. Several months ago it was equal about $1,800. Now it is about $800.
Prices in Moscow for food and almost all consumer goods in dollar equivalent are close to American prices or higher. Can a Muscovite survive today?
Income of most of Russians is lower than income of Muscovites.
Last years 50,000 of Russian families took dollar mortgages from Russian banks. Now practically none of them is capable of paying interest on these mortgages.
Government asked banks to turn this mortgages into rubles using rates that existed at the moment when mortgages were taken. Banks turned this suggestion down. Nobody knows today what is going to happen to these 50,000 families.
“A rally over the dollar mortgage holders in Moscow.”
Most of Russian travel agencies are going out of business, as Russians cannot afford traveling abroad any more.
Duma is seriously considering outlawing using dollars inside of Russia.
Even vodka production, a business traditionally most stable in Russia, has serious problems today. According to state statistics service Rosstat, vodka production in Russia fell 22% last year. The deepest recession was in December, the peak of the ruble crash, when production dropped 47% compared to the same period a year earlier.
This does not mean that Russians started to drink less alcohol. Counterfeit alcohol consumption has grown as much as 65%.
Last week Russia has dropped the minimum price of vodka by 16% in attempt to fight moonshine consumption, and return state profits.
As of Sunday, the minimum price of vodka is now 185 rubles ($2.60) for half a liter, down from 220 rubles ($3.10).
Alexei Kudrin, former Russian finance minister told last Monday in a news conference:
“Today, I can say that we have entered or are entering a real, full-fledged economic crisis. Next year we will feel it clearly”.
